Consumers, he said, had given the Government's temporary VAT cut a "massive thumbs down" and ministers needed to get credit moving again.

Ms Harman accused the Tories of "talking down" confidence in the economy, insisting that a fiscal boost was vital to get retail sales rising again.

"We would take the action while all the Tories do is carp and criticise."

Mr Hague said today's unemployment figures showed a further rise of 137,000 - the highest level for 10 years and "obviously set to rise further".

He said: "We've been pointing out that the big problem is even viable businesses can't get the loans they need.

"Last week we asked the Government again to look at the bank rescue package and the Chancellor did announce on Monday one of the measures we have been calling for.

"But will the Government now accept the urgent need to get money into the hands of businesses of this country."

Ms Harman said: "Any time, anyone loses their job, that is a terrible blow for them.

"That is why we are stepping up Government action with a £1.3 billion package to protect people who become unemployed, to help them get the skills to get new jobs and also to make sure that if they become unemployed they don't lose their home.

"You're right that small businesses are the lifeblood of enterprise and employment in this country.

"That is why we recapitalised the banks to stabilise the banking system and that's why in January we will be setting up a new small business loan guarantee scheme.

"It's true to say that while lending figures are starting to show increasing lending to small businesses, there are still businesses having problems.